The cash-pooling agreement is a form of effective financial management, used by entities belonging to one capital group, or economic affiliates in any other way.
It shall be imported to concentrate the money from the individual accounts of the individual entities into the group's common account and to manage the amount thus collected, using economies of scale. This allows to compensate for temporary surpluses, as demonstrated by one of the entities, with temporary deficiencies in other entities.
This minimises the costs of lending the activities of the group entities by using the group's own resources.
With the implementation of the liquidity management system - cash pooling contracts, the main objective is therefore to increase the efficiency of the business activity of individual participants in the system, through more efficient money management and reduced external financing costs.
The manner in which transactions of this type are included in the VAT records of the participant will depend on the location of the service and the definition of the subject matter of the service.
This is important that foreign entities, banks or other entities in the group responsible for coordinating the structure are often involved in the structure.
An important element is the way in which the remuneration for the services provided is determined.
Since cash-pooling is a structure in a group of affiliated entities and a bank, it may be found that the group entity participating in the clearing structure as the Coordinating Company does not collect remuneration on this basis, the question arises as to whether all activity of cash-pooling entities will be subject to VAT and at what rate of tax should be settled on the services provided.
By nature, cash pooling services provide the bank to it. If the bank is a foreign bank, it will be important to define the place of provision of services.
The activities performed by the bank include: making available and keeping its account, transferring funds from the accounts of the Companies participating in the pool in order to balance the balance to a set level, handling and providing access to the online cash pooling management platform and charging and paying interest due to individual cash pooling system participants.
For their benefit, the bank receives remuneration from the Company. The correct determination of the place of service depends on whether the service is subject to tax on goods and services in Poland or not.
In accordance with the general principle contained in Article 28b(1) The law, the place of supply of services in the case of the provision of services to the taxable person, is the place where the taxable person who is the recipient is established, subject to section 2-4 and Article 28e, Article 28f(1)(1a), Article 28g(1), Article 28i, Article 28j(1)(2) and Article 28n.
The place of supply and therefore the place of taxation of services provided to national entities by a bank which does not have an establishment or permanent establishment in the territory of the country, according to the content of the Article 28b(1) The act, is the place where the customer is established and therefore Poland.
In the Cash-pooling structure, services purchased by the Company participating in the service structure are not activities listed in Article 43(15) VAT laws, i.e.
activities excluded from the exemption, thus such services benefit from the exemption on the basis of Article 43(1)(40) VAT Act, however, it is necessary to include the services provided in the VAT records of the Polish participant in the structure.
This participant will be required to demonstrate the import of services provided to it by the bank as exempt services.
It is more complicated to define the activity of the process coordinator – a company in the process management group, which is often a foreign entity. Within the cash pooling structure, the Coordinator shall carry out monitoring and management activities for the participant.
It is therefore implemented first the condition allowing the monitoring and management of the cash pooling structure to be considered as the provision of services by the coordinator to the Polish participant, following the activities provided, he is the direct beneficiary of these benefits.
The coordinator does not normally charge remuneration for the services it provides. The condition concerning remuneration for the activities carried out is therefore not fulfilled.
If, in return for a certain benefit performed by the Coordinator for the Company, he does not receive remuneration for these activities, he cannot speak of a mutual benefit from the buyer.
The activities described above performed for the Company by the coordinator will therefore not constitute the provision of services according to Article 8(1) VAT Act.
Nor can such activities be considered to be the service referred to in the cited above. Article 8(2)(2) Act. In the correct definition of roles in the cash-pool structure, this activity is related to the economic activity of the Coordinator, so Article 8(2) does not apply.
Given that monitoring and structure management activities carried out by the Coordinator do not constitute the provision of the services referred to in Article 8 Nor will the law, in the present case, import of services, understood as the provision of services for which the recipient is a taxable person.
The cash-pooling structure participant will therefore not be required to show the import of services provided to it by the Coordinator.